Accounting. How Business Activities affect the Account Equation transaction - a business activity that changes assets, liabilities, and owners equity.

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Presentation transcript:

Accounting

How Business Activities affect the Account Equation transaction - a business activity that changes assets, liabilities, and owners equity account - a record summarizing all the info pertaining to a single item in the accounting equation account title - the name given to an account account balance - amount in an account received cash = cash increased paid cash = cash decreased

How Business Activities affect the Account Equation received cash = cash increased paid cash = cash decreased get in the habit of 1)read the transaction 2) id the accounts 3) classify the acct. transaction doesn’t always involve both sides of the equation; but the equation will always stay balanced

Transaction 1 August 1, 2008, Received cash from owner as investment

Assets=Liabilities+Owners Equity Cash=Kim Park, Capital $0 $0 $0 +$5,000+$5, $5,000 $0 $5,000 capital - account used to summarize the owners equity in the business Received Cash from Owner as an Investment

Transaction 2 August 3, 2008, Paid cash for supplies, $275.00

Assets=Liabilities + Owners Equity Cash+ Supplies=Kim Park, Capital $5,000$0 $0$5, $4,725 $275 $0$5,000$5,000 Paid Cash for Supplies

Transaction 3 August 4, 2008, Paid cash for insurance, $1,200.00

Paid Cash for Insurance Assets= Liabilities + Owners Equity Cash+ Supplies + Prepaid=Kim Park, Insurance Capital $4,725 $275 $0$0 $5,000 -1,200 +1, $3,525 $275 $1,200$0 $5,000 $5,000 $5,000 Paying cash for insurance changes two assets

Transaction 4 August 7, 2008, Bought Supplies on account from Supply Depot, $500.00

Bought Supplies on Account Assets = Liabilities + Owners Equity Cash+ Supplies + Prepaid =Supply Kim Park, InsuranceDepotCapital $3,525 $275 $1,200 $0 $5, $3,525 $775 $1,200 $500 $5,000$5,500 Buying supplies on account changes one asset and one liability

Transaction 5 August 11, 2008, Paid cash on account to Supply Depot, $300.00

Paid Cash on Account Assets = Liabilities + Owners Equity Cash+ Supplies + Prepaid =Supply Kim Park, InsuranceDepot Capital $3,525 $775 $1,200 $500 $5, $3,225 $775 $1,200 $200 $5,000$5,200 Paying cash on account changes one asset and one liability